ExpertEasy2 marksMultiple Choice
ACCA · Question 13 · Agriculture
Section A
DairyFarm Co owns a herd of 100 cattle. At 1 January 20X5, the herd's fair value was $150,000, with estimated point-of-sale costs of $5,000. During the year, no cattle were bought or sold. At 31 December 20X5, the fair value of the herd increased to $180,000, with estimated point-of-sale costs of $6,000. What amount should be recognized in profit or loss for the year ended 31 December 20X5 regarding the cattle?
Section A
DairyFarm Co owns a herd of 100 cattle. At 1 January 20X5, the herd's fair value was $150,000, with estimated point-of-sale costs of $5,000. During the year, no cattle were bought or sold. At 31 December 20X5, the fair value of the herd increased to $180,000, with estimated point-of-sale costs of $6,000. What amount should be recognized in profit or loss for the year ended 31 December 20X5 regarding the cattle?
Answer options:
A.
A gain of $30,000
B.
A gain of $29,000
C.
A gain of $24,000
D.
Nil, gains are only recognized upon sale
How to approach this question
Calculate the Fair Value Less Costs to Sell at both the start and end of the year. The difference is the gain or loss recognized in P&L.
Full Answer
B.A gain of $29,000✓ Correct
Under IAS 41 Agriculture, biological assets are measured at fair value less costs to sell.
Value at 1 Jan = $150,000 - $5,000 = $145,000.
Value at 31 Dec = $180,000 - $6,000 = $174,000.
The increase of $29,000 is recognized immediately in profit or loss.
Common mistakes
Ignoring the point-of-sale costs or only deducting them at the end of the year.
Practice the full ACCA FR — Financial Reporting Practice Exam 2
32 questions · hints · full answers · grading
More questions from this exam
Q01**Section A**
GlobalHealth NGO recently changed its accounting policy for valuing medical invent...EasyQ02**Section A**
CloudSync, a tech startup, signs a contract to provide a customer with a customize...MediumQ03**Section A**
AgriCorp owns a specialized automated harvester purchased for $200,000 on 1 Januar...MediumQ04**Section A**
MetroWater, a public utility, operates a water treatment plant with a carrying amo...MediumQ05**Section A**
Oceanic Drillers, a cross-border multinational, has a decommissioning provision fo...Hard